Ruling: IBM owes Indiana millions

INDIANAPOLIS (Network Indiana): IBM owes Indiana more than 70-million dollars, in the apparent conclusion of a nine-year legal battle.

IBM and the state sued each other after then-Governor Mitch Daniels fired the company from a failed privatization of the welfare intake process. The Indiana Supreme Court found IBM had breached its contract, and ordered a lower court to calculate damages. Both sides returned to the Supreme Court to fight over Marion Superior Judge Heather Welch’s award of a net $78-million to the state. The state argued it should be more, while IBM said it should be less.

A 3-1 court rejected both arguments.

Welch’s ruling awarded the state $128-million but agreed with prior rulings that IBM was entitled to reduce that amount for equipment costs. Under state law, the company is also entitled to interest, but the court unanimously declared that money began accruing after Welch’s ruling last year, not when a judge first awarded equipment costs in 2012. That’s a $14.5-million difference.

Justice Geoffrey Slaughter agreed with the lower interest rate but argued in a dissent that the court applied the wrong legal standard to the breach of contract claim and awarded too high a judgment as a result. He warns future contractors may be reluctant to do business with the state if they run the risk of being charged for work over and above their original deal.

Justice Mark Massa, who was Daniels’ chief counsel when the IBM deal was struck, didn’t take part in the case.

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